The terrible price of inaction

The terrible price of inaction

Region’s refusal to add pipeline capacity is costing us a lot

THIS WEEK NEW ENGLAND reached the terrible distinction of having the most expensive natural gas in the world.

You read that correctly: Not just the highest natural gas prices in the United States, or in North America, but on the entire planet.

When the spot-market price for natural gas hit $35.35 Tuesday at the main trading hub for all of New England, the Algonquin Citygate, that was more than 13 times more expensive than at the central US price-setting location, the Henry Hub in Louisiana. That’s the equivalent of filling up your car with $32-a-gallon gasoline.

Why is this happening? The short answer: New England does not have sufficient natural gas pipeline capacity needed to ensure reliable, affordable access to this clean-burning, abundant fuel produced right here in the United States.

Compared to homeowners in other communities across the country in states such as Ohio and Pennsylvania, New Englanders are paying hundreds of dollars more every year for electricity and home heating, all because everyone from local environmental extremists to New York Gov. Andrew Cuomo has relentlessly opposed every reasonable proposal to allow New England to secure the natural gas pipeline capacity we need.

Our region has aggressively transitioned much of its power generation in the last decade to natural gas to take advantage of the abundant supplies here in the United States as well as the environmental benefits that come with the use of this clean fuel. Today, data from ISO-New England, our regional power-grid operator, show that natural gas now produces 50 to 60 percent of the electricity we use in New England on an average day.

New England has also moved just as aggressively to increase use of natural gas to heat our homes, schools, and businesses. Since 2000, more than 200,000 residential customers have switched to or added natural gas heating throughout the region. Natural gas now heats more than 52 percent of all homes in Massachusetts and 54 percent in Rhode Island, according to the Northeast Gas Association.

Connecticut, Maine, New Hampshire, and Vermont have multiple proposals underway to meet thousands of consumers’ demand for expanded access to convenient, affordable natural gas. Customers are clearly demanding greater access to natural gas.

But except for a modest increase in capacity on the Algonquin system and for some recent upgrades, increased natural gas pipeline capacity has been thwarted from coming anywhere close to keeping up with increased demand in the region.

In a cold snap like the one we’re facing, the severe constraints on pipeline capacity lead to sudden price spikes, and natural gas that normally costs $3 or $4 jumps to $35. Additional pipeline capacity could help dramatically reduce those price spikes.

Further, utilities are less able to plan 12 months ahead if energy markets are volatile. It’s why all six New England states rank in the top 10 of US states for most expensive electricity, up to 50 percent higher than the national average.

What’s even worse: This is an entirely needless problem for our region. New England is just 200 miles east of some of the most abundant, low-cost natural gas in the world from Pennsylvania’s Marcellus Shale region. With adequate pipeline capacity, access to this low-cost fuel could transform our regional economy and lead to the creation of thousands of new jobs. The opportunity is right in front of us–and New England is being denied that opportunity.

New England leads the world in many good ways – our quality of life and rich history, our colleges and hospitals, our beautiful mountains and beaches and colonial villages.

Meet the Author

Steve Dodge

Executive director, Massachusetts Petroleum Council
Leading the world in needlessly expensive natural gas is a distinction New England is inflicting on itself and can’t afford. This week has shown us, in dramatic fashion, the terrible price we’re all paying for being refused reasonable and long-overdue investments in our natural gas pipeline capacity.

Stephen C. Dodge is the executive director of the New England Petroleum Council.

  • NortheasternEE

    We are told that cheap natural gas is forcing the early retirement of coal and nuclear. Now we are told that we pay the highest price for natural gas. So, what is going on?

    Intermittent and variable power from wind and solar has teamed up with fossil fuel natural gas and oil to put competitive coal and nuclear out of business. They have convinced state and regional politicos that the combination of wind, solar, and natural gas is cheaper, more resilient, and a more diversified system.

    If this was true, rates should be dropping. Instead rates are up and going higher. State and regional mandates for renewable energy are destroying the competitive wholesale market for electricity with above market power purchase agreements with natural gas backup firming. When all coal and nuclear is forced off the grid, New England will be hostage to a single fuel monopoly, natural gas. So much for a diversified resilient grid.

    As long as natural gas is in the system, there is no such thing as “clean energy”, and there is no stopping Global Warming.

    Nothing the New England Petroleum Council is selling is true!

  • Paul Lauenstein

    Cost estimates for fossil fuels such as fracked gas do not take into account externalities such as the value of a grandchild. We must break our addiction to fossil fuels if we want to leave a survivable environment to future generations.

  • Larry Ouellette

    If Mr. Dodge’s Methane Gas industries invested in fixing the 10 of thousands of gas leaks in Massachusetts alone, and ran the existing pipelines at or near capacity, there would be zero need for new pipeline infrastructure. The Methane industry takes a large pipeline project and breaks it up into smaller projects, each with different names, different LLCs just for that project, with supposedly different objectives. If you put the projects together, the new pipeline infrastructure runs from the fracking fields to Canada, where the Methane will be exported. The truth is out there, but you won’t get it from Mr. Dodge, or anyone affiliated with the Methane Gas industry.

  • Ed Cutting, Ed. D.

    Build the pipeline!!!!

  • Mhmjjj2012

    How “abundant” is natural gas produced right here in the United States? According to the U.S. Energy Information Administration, as of January 1, 2015 “there were about 2,355 trillion cubic feet (Tcf) of technically recoverable resources of dry natural gas in the United States. At the rate of U.S. dry natural gas consumption in 2015 of about 27.3 Tcf per year, the United States has enough natural gas to last about 86 years. The actual number of years will depend on the amount of natural gas consumed each year, natural gas imports and exports, and additions to natural gas reserves. Technically recoverable reserves consist of proved reserves and unproved resources. Proved reserves of crude oil and natural gas are the estimated volumes expected to be produced, with reasonable certainty, under existing economic and operating conditions. Unproved resources of crude oil and natural gas are additional volumes estimated to be technically recoverable without consideration of economics or operating conditions, based on the application of current technology.” So, the executive director of the New England Petroleum Council considers an 86 year supply of natural gas “abundant” while my two year old grandchild might think otherwise twenty, thirty or forty years from now.

  • Allan Fierce

    Mr. Dodge has made this pitch dozens of times before without ever acknowledging that there just might be a bit of problem with catastrophic climate change due to emissions from fossil fuels. He never addresses the question “Why don’t we just invest in new clean energy sources so that we can BOTH (a) have enough energy at reasonable prices and (b) meet our much needed and legally mandated obligation under the state’s Global Warming Solutions Act (“GWSA”) to reduce our emissions statewide by 80% by 2050. To meet that legal requirement, we need to begin ramping down statewide emissions from natural gas, starting NOW, not increasing our reliance on natural gas. The current greenhouse gas emissions from burning natural gas in Massachusetts are already at about 150% of the total emissions allowable under the GWSA in 2050. There is no way to reach that 2050 goal by building additional natural gas infrastructure.

  • Melanie Peyser

    This article would make sense if Vermont NG prices weren’t comparable to the rest of New England’s prices. Vermont doesn’t buy it’s NG through the Algonquin Citygate but rather at Empress and Dawn in Canada. Vermont Gas faces no pipeline capacity constraint. In fact, TransCanada’s system from Alberta to Ontario is under-subscribed. In fact, in a regulated pipeline market, when there is more pipeline is built than is needed the infrastructure costs get spread over too few customers and transportation costs go up. End users — often residential customers — get slammed with the cost. That’s exactly what’s happening in Vermont. Vermont Gas built an unnecessary pipeline extension, for which it has been receiving 5% more than the actual cost of gas service delivered from residential customers for 5 years to pre-pay for new infrastructure and “smooth rates” so there would be “zero or near zero” rate increases when the extension was completed. When construction costs skyrocketed, the company kept building. Now, customers have seen 6% percent in rate increase requests over the past year, and many of the new pipeline extension costs have yet to be be included in rates. There is ample evidence that pipeline companies seek to overbuild infrastructure in New England because that is how they profit – through return on investment in infrastructure rather than through profit on NG sales. As soon as we begin to hold companies accountable for their promises and force them to forfeit infrastructure return on investment when it doesn’t produce the results claimed when projects are proposed they’ll stop wasting ratepayers time and money,

  • Nancy Clark

    Mr. Dodge, as mothers and caregivers, we are appalled that, as executive director of the New England Petroleum Council, you characterize concerned citizens as “environmental extremists!” This narrative continues the petroleum industry’s long-term refusal to acknowledge the facts of climate disruption, the same disruption that increases unnatural weather events like this week’s extreme cold temperatures and last summer’s record heat.

    You claim the answer to extreme cold weather is to pipe in more natural gas. We strongly disagree, and we appreciate Greg Cunningham’s excellent response titled, “More pipelines aren’t the answer” (Commonwealth Magazine, Jan. 6, 2018). Mr. Cunningham concisely summarizes the technical and economic reasons for reducing our use of natural gas. As mothers and grandmothers, we are deeply concerned that increased fossil fuel emissions will cause even more climate disruption and extreme weather events that will jeopardize our children’s future!

    We care deeply about the world our children will inherit, and we reject the status quo, where short-term profits for fossil fuel companies are prioritized over our children’s long-term well-being. We share your appreciation for our quality of life in New England, our rich history, and our beautiful mountains and beaches – and we want to preserve them. More fossil fuel emissions will further increase the climate disruption that threatens our natural treasures – and, most important – our children and grandchildren!

    The short-term answer to extreme weather is to improve energy efficiency and install better insulation in our homes. As Mr. Cunningham described, the ultimate challenge is to develop more renewable energy sources and storage technology, and many countries have already surpassed the United States in clean energy innovation. We need to take smart action toward a healthy clean energy future for our children.

    Nancy Clark, Mothers Out Front Massachusetts